Three years ago, when I first walked past Stetson University's business school stock trading room and peered in the glass window, I thought it resembled a microcosm of a Wall Street trading experience. Student investors studied stock charts as a real-time stock ticker wrapped around the room. News reports flashed on dual-screen monitors, while on the background television CNBC's Rick Santelli discussed the day's top business headlines.

Little did I know that three years and two majors later, I would find myself part of Stetson's Roland George Investments Program (RGIP). I never would have expected to be qualified to help manage the program's impressive $3 million portfolio. This fact differentiates the program at Florida-based Stetson University from other university programs: it is student-run and the stocks, bonds, money and risks are all real.

The Road to $3 Million

It all started in 1980 with a meeting between a widow and a group of university administrators, which ultimately set into motion what has become one of the most successful and innovative college programs in the country.  Sarah George wanted to fulfill her husband Roland's dream of starting a college investment program where students would make the decisions on an investment portfolio and be responsible for the success or failure of those decisions.

From an initial gift of approximately $500,000, the program has grown over the last 27 years to nearly $3 million. The venture has consistently performed through a variety of market conditions, averaging a seven percent return after expenses.  It operates through two funds: one an equity fund and one composed of fixed-income instruments, with the total funds split equally between the two. 

Success and Guidance

RGIP was a precursor to what is now an international movement.  Today, there are more than 200 schools in the United States, Canada, Mexico, and Israel that have student-managed investment funds. For the past seven years, Stetson students in the RGIP have ventured north to the University of Dayton's Redefining Investment Strategy Education (RISE) Symposium, an international student-managed portfolio competition. In six of those years we have finished first. This, and the fact that we have won in four different portfolio management categories, makes Stetson the most successful school in the competition's history. 

Our team success is a result of hard work, continued dedication and excellent guidance. K.C. Ma, visiting professor of investments for RGIP, has been one of the great assets among the RGIP faculty. His knowledge and wisdom help guide us toward achieving our policy statement, which essentially aims to maximize holding-period return. Ma helped us to grow the portfolio, consistently outpace the S&P 500, and to transition into successful careers. 

Strategy: The Power of Research

Each semester begins with establishing investing criteria, which is used to analyze potential holdings. One unique aspect of equity investing is the general trend toward investing in small cap growth firms. As part of the RGIP strategy, we research unknown firms and discover market inefficiencies in share prices and future growth outlooks. This approach has been supported over years of profits, which have been realized as the market discovers the growth potential of those firms already held by RGIP.

We target companies that are small enough for us to contact by phone, and where we are able to directly speak with their CEO or CFO. We begin our security selection process with a top-down approach. In the last step, however, it's not uncommon to analyze eight to nine firms' financial statements and SEC reports before presenting our selection before the RGIP board. Our equity analysis considers the following: (1) future growth opportunities; (2) management and core leadership; (3) social responsibility; (4) and current share price.

All analyzed equities are required to undergo multiple valuation models-such as Malkiel's, Holt's, Free Cash Flow, or Franchise-Based Growth-which are critical in determining fair value.  Once a student has selected a final holding, he or she presents it for acceptance before the board, which consists of four student trustees and three faculty trustees. This process achieves the specified goals of RGIP, and we are able to understand the role of discovering undervalued firms in maximizing the holding period return.

The process taught to us by Professor Ma proved extremely beneficial to students like me who are moving into the real world of finance and economics. The quality of academic insight, combined with the experience of real-world investing, equips students who are far ahead of typical college graduates. Our stellar track record in competition, as well as the quality of jobs secured by RGIP students, serve as a testimony to the benefits of being responsible for managing $3 million of  someone else's money.

Billy Houghton, from Fort Myers, Fla., is a senior at Stetson University majoring in finance. He has been an active member of the Roland George Investments Program, and also plays golf for the Stetson men's team. He is preparing to graduate Summa Cum Laude this spring, and plans to pursue a career in finance.

© 2008, InCharge® Education Foundation, Inc.